2009-10 - Aditya Birla Nuvo, Ltd

BIRLA SUN LIFE INSURANCE COMPANY LIMITED
B. Risk Policies:
The following risk policies govern and implement effective risk management practices:
Product Design and Pricing Policy, Underwriting and liability management policy, Reinsurance
ceded policy, Capital Management policy, Investment Policies, Valuation Policy, Information
security policy, Business Continuity policy, Operational Risk Management Policy, Fraud
Management policy, Asset Liability management policy etc.
C. Risk Mitigation Strategies:
The Company is exposed to several risks in the course of its business. The risks on the liabilities
side may arise due to more than expected claims. On the assets side, the risks arise due to the
possibility of fluctuations in their values. The Company is also subject to the expense risk, since
until new business volumes grow significantly, the actual expenses of the Company will exceed
the expenses loaded into the product pricing. The Company has implemented adequate
safeguards to mitigate these risks. The overall business risks and mitigation strategies are
bifurcated as are described below:
Strategic Risk
Investment
Risk
Operational
Risk
Risk to future earnings or capital from a failure to achieve our strategic
or long term business plans, either through incorrect choices or improper
implementation of those choices.
Mitigation Strategy: Strategic risks are managed through risk
identification and review process through the Enterprise Risk
Management framework. Strategic risks and mitigating action plans
are monitored through Risk Management Committee.
Risk to investment performance due to movements in systemic &
unsystemic factors like credit, market, interest, liquidity, global & other
macro factors etc. This can impact both the guarantees given on the
product or assumption made at the time of product development. The
uncertainty surrounding the likelihood of defaults of counterparties to
whom the Company has an exposure.
Mitigation Strategy: The policies well defines governance structure for
Investment, Robust Investment policies & processes insures that the
risk is identified well and acceptable levels are defined and monitored
regularly. the stringent investment norms, approval structure, insures
a portfolio which is healthy & yet delivers the expected performance.
The Company uses systems like MSCI barra to evaluate & monitor
risks. A proper asset liability matching is done for traditional products
offered by the Company.
The uncertainty arising from larger than expected losses or damage to
finances or reputation resulting from inadequate or failed internal
processes, controls, people, systems or from external events.
Mitigation Strategy: Operational risks are governed through Operational
Risk Management policy. The Company has been maintaining and
reporting an operational loss database to track and mitigate risks leading
to financial losses. The Company has also initiated a Risk Control Self
Assessment process to embed the control testing as a part of the day to
day operations. To control operational risk, operating and reporting
processes are reviewed and updated regularly. Ongoing training
through internal and external programs is designed to prepare staff at
all levels for meeting the demands of their positions. The Company has
a Business Continuity Plan in place to manage any business interruption
risk. The Company has become the first Indian Insurance company to
be BS25999 (British Standard 25999) certified. Fraud management is
handled through internal committee and governed by the Fraud
Reporting and Investigation Policy.
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